Council Hears From Two Sides of EUC

The 4-3 Electric Utility Commission airs pros and cons of rate increase

Mayor Lee Leffingwell opposes plan to raise electric rates.
Mayor Lee Leffingwell opposes plan to raise electric rates. (Photo by John Anderson)

Members of a divided Electric Utility Commission on Tuesday laid out arguments for and against Austin Energy's proposed rate structure during a special-called meeting of the City Council. While no action was taken, council members raised plenty of questions based on the testimony they heard at the first public hearing Jan. 12. Much of the discussion turned on the vexing uncertainty of how to keep a $1 billion municipal utility solvent without breaking the backs of ratepayers. The tone of Tuesday's meeting was framed in part by Mayor Lee Leffingwell's Jan. 15 blog post in which he came out strongly against the proposed hike.

Leffingwell's public opposition to the increase was roundly applauded by the proposal's critics. Topping the list of reasons he opposes the plan is the need for clarity on AE's future revenue requirements "based on sound analysis and projections," he wrote. He also expressed concerns about residential ratepayers bearing the brunt of the hike and the utility's lack of consideration for "the special needs of schools, churches and our low-income residents." And he cited the concerns of ratepayers outside city limits who are threatening to challenge the increase with the Public Utility Com­mis­sion, all while echoing a prevailing theme of many of the opponents – that the proposal does little to encourage energy efficiency, conservation, and the use of renewable energy.

Nevertheless, four of the majority EUC members who voted for the $100 million-plus increase stood their ground Tuesday and vigorously defended the proposal. EUC Chair Phillip Schmandt urged the council to avoid turning AE's projected revenue requirement into a political issue. "Austin Energy has been operating in a deficit for two years," he said after the meeting. "Without a rate increase, Austin Energy's bond rating would likely be decreased, which would cost us more in the future." The rate package poses a particularly difficult political challenge for the four City Council incumbents running for reelection this year: Leffing­well, Sheryl Cole, Mike Mar­tin­ez, and Bill Spel­man. So far, none of them face a competitive opponent, although environmental activist and former Council Member Brigid Shea is considering challenging Leffingwell for the mayor's seat.

EUC members Shudde Fath and Barbara Day weighed in against the current increase (though a Channel 6 technical glitch created a large audio gap in Day's presentation; she was out of town and speaking to council by phone). Fath, the commission's longest-serving member, advised council to hire its own consultant to review the rate package, instead of relying on AE's handpicked consultants; she recommended Austin firm Diver­si­fied Utilities Consultants, which she says has successfully assisted the city in past rate cases.

Commissioner Steve Smaha, touching on a theme that typically arises during the city's annual budget process, suggested it was time to rethink the practice of shifting $150 million or so from the utility to the city's general fund to help pay for city services. Martinez's resistance to that notion was immediate: "If you want to cut that $150 million, then which ... fire stations do you want to close? How many libraries do you want to close?" It's one thing to treat AE as a business, he added, but that business is also an asset to the citizens it serves.

The next public hearing is set for Feb. 2 (a Jan. 26 hearing was postponed because Leffingwell will be out of town). The mayor noted that hearings will likely continue beyond Feb. 2 – presumably until AE can come up with a rate proposal on which a majority of council can agree. (For a wrap-up of the Jan. 12 hearing, see "AE Rate Gate," Newsdesk blog, Jan. 13.)

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